BEST PRACTICES IN HANDLING THE HR & REWARD ISSUES AROUND MERGERS & ACQUISITIONS · 2020-07-19 · BEST PRACTICES IN HANDLING THE HR & REWARD ISSUES AROUND MERGERS & ACQUISITIONS Presenters

BEST PRACTICES IN HANDLING THE HR & REWARD ISSUES AROUND MERGERS & ACQUISITIONSPresenters• John Macdonald, FCIPD – Development and Reward

Solutions Associate, CIPD• Taisha Nurse – MCDermott• Barry Jones – SNC Lavalin• Caroline Parsons - WSP

WORKSHOP OBJECTIVES

Review what the “experts” have said about M&A best practices in handling the people issues

Hear first hand about the lessons learned from real life and recent M&A’s in the region

Share any other M&A experiences and lessons learned in the room

Co-develop a “blueprint” for addressing the people issues around any future M&A’s that you may be involved in

Context

Growth in M&A activity in MENA: 50% increase in value of deals between 2017-2018; UAE in top spot; Financial Services leading sector

(Source: Gulf Business)

Increased focus on the importance of non-financial metrics in measuring success of acquisitions

A growing realization that proper attention to the people issues will drive success or failure

So when does HR TYPICALLY get involved?

M&A phase Typical HR involvement

Target evaluation

Due diligence

Deal structuring

Integration planning

Integration implementation

Sources: various

What the experts have said about HR’s role...

“It is interesting to note that very successful dealmakers appear to involve HR in more aspects of the deal than others.”

“An optimized integration team will include representatives from the core functions: legal, tax, HR, IT, treasury and commercial.”

“For companies that rated their transactions as very successful, HR played a critical role in the area of cultural alignment”

Source: Canadian Financial Executives Research Foundation Report 2010

Source: Vintage Group: M&A Good practice and bad pitfalls 2015www.bakermackenzie.com

Due diligence considerations

Typically top considerations:

• Severance costs

• Retention of key executives

• Loss of other key talent

• Cultural incompatibility

Typically neglected considerations:

• Impact on employee relations

• Unwanted employee turnover

• Future pension and benefit costs

• Decrease in engagement and productivity

People challenges at the INTEGRATION phase

• Retaining key talent

• Impact on middle management

• Implementing workforce reductions

• Integrating compensation and benefits programmes

• Transitioning HRIS and Technology

• Communicating and managing change

• Leadership team selection

• Cultural alignment *

Source: PwC: “Talking about the people side of M&A” 2016

* “Sometimes the cultural challenges lie not in the cultures themselves but in managers’

inability to perceive a culture. That is managers may not understand how the

culture functions across the two organisations.”

More lessons learned……

“The companies that do it well are the ones that have dedicated integration teams, with a senior integration leader who has some gravitas within the company, who can really drive home the importance of the post-acquisition steps within the larger organization.”

“You must assess the target’s culture and how it relates to your company and how it will affect it. Helping people to identify the differences and change them is essential, and often overlooked”

“Decision making must be quick. You need to make decisions quickly as stalling can sometimes kill deals. It is often better to be quick — and sometimes wrong — than to wait for incremental information”

Source: Vintage Group: M&A Good practice and bad pitfalls 2015www.bakermackenzie.com

Key success factors in M&A

Planning

Engaging strong leadership and direction

Achieving early clarity of the organisation structure

Communication

Having a strong and clear “Day 1” message

Managing expectations and eliminating

uncertainty

Opening as many communication channels

as possible

Publicising quick-wins

Change management:

Training decision-makers in how to deal with

transition

Treating it as a major strategic project

Looking for positive change from the outset

Key success factors in M&A

Speed

Making the tough decisions early on

Integrating rewards and benefits ASAP

Integrating systems and technology ASAP

Culture

Bringing the combined organisation together into a single company culture

Focusing on where you need to go rather than where you have been

Turning cultural diversity into strategic opportunities

Facilitating early mixing

Talent retention

Finding the right incentives for retaining

key people

Adopting a staffing and selection approach that is

perceived to

Some local case studies

McDermott – two global players still coming

together – and a “spin-off” to add to the mix

SNC Lavalin – life on both sides of acquisitions with a

focus on systems integration

WSP – highly acquisitive engineering consultant

driving multiple entities into “ONE WSP”

One Team: One HR First steps: Strategic implementation plan

Talent Acquisition

Total Reward

Talent Management

Organisation Development

Mobility

HRIS & HR Analytics

✓ Grade and Job title mapping process

✓ Legacy acquisition salaried employees uploaded to legacy acquirer system

✓ Based on new titling structure, merit and bonus planning

✓ Global Headcount reporting enabled

Integration C&B Framework

Full C&B Review

MENA/APAC Survey

Global broker and benefits review

Leave policies review

Policy Re-development

ERP Integration

LESSONS LEARNING

• Constant communication via various channels underpinned by a developed Employee comms and engagement strategy globally.

• Comprehensive project plan of HR activitiesand allocating sufficient time to educate key stakeholders on implementation plan

• Prepare for constant change – adopting a culture that embraces the inevitability of change

• Educating and engage the HR teams on the ground – number one change agents and must be aware of the wider strategy

Integration of HR Systems

•How managers will access their employee’s information?

•Approval processes

•Difference between businesses, culture, regional work practices

•Areas of HR with links to systems i.e. corporate processes, policies, compensation & benefits

People Impact

•Different system architecture i.e. data formatting/dates

•what data is mandatory – are their gaps?

•Inconsistent/duplicated terminology

•Can the new HRMS completely replace the old?

•Integration with other systems?

System Impact

•The right project team both companies represented

•Meticulous planning and project management

•Engagement with other areas of business (IT, Finance etc.)

•Guidance from an experienced implementation partner

•Clear and regular communication

What’s Required?

16

Integration of HR Systems

•Review lessons learned with prior project team

•For geographically dispersed teams allow for regional holidays, differences in working days, time-zones

•Allow adequate time to data cleanse, test, upload, and to build and document integrations

•Provide opportunity for acquired to see new system being used instills confidence and helps conceptualize data preparation

•Consider collaboration between recruitment and HR teams: If both are users it will reduce potential data errors and improve efficiency

Lessons learned

•Acquirer can benefit from new functionality to cater for what acquired already has i.e. recruitment/onboarding

•Acquired benefits with access to functionality the acquirer already hasWin-Win

The integration journey

Culture

DISRUPTION

UNKNOWN

THEM & US

People

FEAR OF UNKNOWN

v

AMBITION

Employment Benefits

KNOWN BUT NOT UNDERSTOOD

USUALLY ON HOLD IN THE AQUIRED COMPANY

HR Involvement

LIMITED!

PRE-AQUISITION

The integration journey

Culture

DISRUPTION

HIGH UNCERTAINTY

THEM!

LANGUAGE MATTERS

People

FEAR SPREADS

POWER STARTS TO MOVE

CHANGE BEHAVIORS SHOW-UP

Employment Benefits

KNOWN BUT STILL NOT UNDERSTOOD

HR Involvement

MEDIUM TO HIGH

UNDERSTANDING CHANGE & CULTURE

EARLY -AQUISITION

The integration journey

Culture

DISRUPTION

REDUCING UNCERTAINTY

NEUTRAL LANGUAGE IS CRITICAL

LISTENING

People

UNCERTAINTY REDUCES

LEADERS ARE KNOWN

ADOPTION OR REJECTION

Employment Benefits

UNDERSTOOD

HARMONISATION IMPACTS KNOWN

WHAT, WHEN AND HOW KNOWN

EMPLOYEE’S INFORMED

HR Involvement

VERY HIGH

TECHNICAL EXPERTS

CHANGE MANAGERS

INTEGRATION

PERIOD

The integration journey

Culture

LANGUAGE IS “ONE”

LEADER BEHAVIOURS CRITICAL

MOMENTS OF TRUTH REVEALED

People

CHANGE BEHAVIOURS CONTINUE

RESIST OR ACCEPT PHASE

HYPER-CARE - ORIENTATION

ENGAGEMENT ACTIVITIES

Employment Benefits

MANAGING ALIGNMENT SIDE EFFECTS

BUILDING AWARENESS

LOOKING AHEAD AT SCALABILITY

HR Involvement

HIGH

POST – INTEGRATION

PERIOD

Key HR activities

Change Management

• HR Teams lead training on change management & culture alignment

• Senior Leaders also trained in change management

Set up HR Workstreams

• Pair workstream leads – give freedom to question

• Senior Leadership Accountability for delivery

HarmoniseBenefits & Positions

• Identify the best of both

• Communicate & Consult employees

• Personalize the details

M&A critical success factorsCultural

integration

Key employee retention

Synergy savings

Employee engagement

Communication

M&A: biggest hurdles

• HR being accepted as a strategic contributor

• Fear of the unknown

• Slow decision-making

• Active disengagement of staff

• Vulnerability of leaders

• Cultural integration

Overcoming hurdles

• Providing training to avoid surprises

• Holding change management sessions

• Open communication to support change management

• HR playing a key role in building 1:1 relationships with key leaders

• Bring people together often

• Visibility of leadership team

• Be prepared to adopt a flexible approach

• Take care with use of language (e.g. “us and them”)

• Get the right resources into the organisation structure as soon as possible

Blueprint for success

• Engage strong leadership and direction

• Make the tough decisions early on

• Involve HR at the earliest possible stage

• Pay meticulous attention to forward planning

• Establish the right mix on a project team

• Adopt effective project management techniques

• Manage expectations and eliminate uncertainty

• Be sensitive to different cultures

• Establish the right incentives for retaining key people

Blueprint for success

• Integrate compensation and benefits as soon as possible

• Integrate HRIS asap but be realistic with your timelines

• Communicate/ communicate/ communicate – with multiple media

• Stay aware of synergy targets and be mindful of loading additional costs

• Have a great onboarding/ orientation programme

• Celebrate successes and quick wins along the way

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